We are working in the engineering sector. Our organization wants to follow a periodicity of two for payment of the Statutory bonus. One is the routine yearly method of Diwali bonus, and another is the monthly bonus. Can we follow both systems in one organization? Please explain.
From India, Ashta
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From India, Ashta
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Statutory bonus cannot be paid in monthly installments because the bonus for a financial year should be paid within eight months of the closing of the financial year. If you pay it monthly, it will extend to 12 months, and that is non-compliance. But you can pay it in such installments that the last installment is paid before 8 months of closing the books of accounts.
Again, the employees would benefit if they received a lump sum amount in hand. Therefore, it is not advisable to pay it even in 8 installments.
From India, Kannur
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4765Again, the employees would benefit if they received a lump sum amount in hand. Therefore, it is not advisable to pay it even in 8 installments.
From India, Kannur
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The monthly paid bonus is production-linked but not governed under any statute, act, or rules. The annual bonus is profit-based and governed by the Payment of Bonus Act. The annual bonus for the current year is payable on 1st April or by 30th November of the subsequent year at a minimum of 8.33% and a maximum of 20% for employees earning ₹21k or less per month.
You can follow the monthly bonus systems as they are linked to production and motivate employees, helping the organization achieve higher production levels. These types of bonus schemes are introduced to optimize production when it exceeds the target. The management sanctions an agreed percentage of the bonus on the excess quantity according to set calculated norms.
From India, Mumbai
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You can follow the monthly bonus systems as they are linked to production and motivate employees, helping the organization achieve higher production levels. These types of bonus schemes are introduced to optimize production when it exceeds the target. The management sanctions an agreed percentage of the bonus on the excess quantity according to set calculated norms.
From India, Mumbai
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There is a major dispute on this.
We received clarification from senior lawyers who explained that the amount paid monthly is considered as salary (even if referred to as a bonus), and the bonus will still be payable at the end of the year under the Payment of Bonus Act.
Furthermore, if paid monthly, PF and ESIC contributions are due on it.
From India, Mumbai
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We received clarification from senior lawyers who explained that the amount paid monthly is considered as salary (even if referred to as a bonus), and the bonus will still be payable at the end of the year under the Payment of Bonus Act.
Furthermore, if paid monthly, PF and ESIC contributions are due on it.
From India, Mumbai
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Hi VJ,
The statutory (annual) bonus, be it Ganesh Chaturti or Diwali or Christmas, is different, and what is disbursed in some establishments, monthly or bi-monthly, or whatever paid, is different. As you know, 'the statutory bonus' is some sort of 'a share' of the profits earned by the establishment, which shall be a minimum of 8.33% of salary or a maximum of 20%, as laid down under the Payment of Bonus Act as described, determined under sec.11 read with sec.4, 5, 6, 10 & 12 of PoB Act. This statutory bonus is payable - i) whether earn profits or not ii) payable before 6 months after the closure of annual accounts (which in India is 31st March > 6 months > 30th Sept.) For this purpose, your accounts dept. shall prepare Form A, B, C & D listed in PoB Rules, 1975 (Central Rules), and submit Returns to the Labour Dept. periodically.
On the other hand, some establishments disburse monthly or in intervals which are more or less linked to the production & productivity wherever in vogue. This is not a statutory bonus as per the PoB act. Generally, this kind of bonus is linked when production for the defined period exceeds the targeted minimum threshold limits, computed under a certain mutually agreed formula. There are also other bonuses (incentives) such as attendance bonus. While the statutory bonus is compulsory, at a minimum of 8.33%, other production-linked bonuses are operated under a bipartite agreement on achieving certain targets only. Both, when applicable, are operable in any establishment, concurrently & as and when "accrued and due." It is customary in many establishments in India ahead of a festival season.
It's legally permissible in more than one installment of the entitled bonus. For example, 50% during June or July (at times employees require financial assistance during schools/colleges reopening to meet fees, books, etc., and in which case the balance 50% can be paid before a major festival such as Diwali, usually during Oct or Nov. The other bonus can be paid monthly or bi-monthly or quarterly as in vogue.
From India, Bangalore
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The statutory (annual) bonus, be it Ganesh Chaturti or Diwali or Christmas, is different, and what is disbursed in some establishments, monthly or bi-monthly, or whatever paid, is different. As you know, 'the statutory bonus' is some sort of 'a share' of the profits earned by the establishment, which shall be a minimum of 8.33% of salary or a maximum of 20%, as laid down under the Payment of Bonus Act as described, determined under sec.11 read with sec.4, 5, 6, 10 & 12 of PoB Act. This statutory bonus is payable - i) whether earn profits or not ii) payable before 6 months after the closure of annual accounts (which in India is 31st March > 6 months > 30th Sept.) For this purpose, your accounts dept. shall prepare Form A, B, C & D listed in PoB Rules, 1975 (Central Rules), and submit Returns to the Labour Dept. periodically.
On the other hand, some establishments disburse monthly or in intervals which are more or less linked to the production & productivity wherever in vogue. This is not a statutory bonus as per the PoB act. Generally, this kind of bonus is linked when production for the defined period exceeds the targeted minimum threshold limits, computed under a certain mutually agreed formula. There are also other bonuses (incentives) such as attendance bonus. While the statutory bonus is compulsory, at a minimum of 8.33%, other production-linked bonuses are operated under a bipartite agreement on achieving certain targets only. Both, when applicable, are operable in any establishment, concurrently & as and when "accrued and due." It is customary in many establishments in India ahead of a festival season.
It's legally permissible in more than one installment of the entitled bonus. For example, 50% during June or July (at times employees require financial assistance during schools/colleges reopening to meet fees, books, etc., and in which case the balance 50% can be paid before a major festival such as Diwali, usually during Oct or Nov. The other bonus can be paid monthly or bi-monthly or quarterly as in vogue.
From India, Bangalore
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In India, the statutory bonus is primarily governed by the Payment of Bonus Act, 1965. Here's how the periodicity works for bonuses, including the routine yearly bonus (often associated with festivals like Diwali) and monthly bonuses:
### 1. Yearly Bonus (Diwali Bonus)
- Frequency: Typically paid once a year, often during the festival season (like Diwali).
- Eligibility: Employees earning up to ₹21,000 per month are eligible for a statutory bonus if they have worked for at least 30 days in the accounting year.
- Calculation: The bonus is calculated based on the employee's salary and the profits of the company for the financial year. The minimum statutory bonus is 8.33% of the salary earned during the year, while the maximum can go up to 20%.
### 2. Monthly Bonus
- Frequency: Paid on a monthly basis, often as part of the salary or as a separate incentive.
- Nature: This is generally not a statutory requirement but can be part of company policy or incentive schemes.
- Eligibility: It may apply to all employees or specific categories based on performance, role, or company policies.
- Calculation: Usually determined based on performance metrics, attendance, or company profitability.
### Key Differences
- Nature: The yearly bonus is often a statutory requirement, while monthly bonuses may be discretionary and linked to performance.
- Amount: Yearly bonuses are based on the annual salary and company profits, whereas monthly bonuses may vary based on individual or team performance.
### Conclusion
For statutory bonuses, you primarily follow the yearly method with a focus on Diwali as a common payment period. Monthly bonuses, while beneficial for employee morale, are typically discretionary and not mandated by law. Always ensure compliance with applicable laws and company policies regarding bonus payments.
From India, Madras
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### 1. Yearly Bonus (Diwali Bonus)
- Frequency: Typically paid once a year, often during the festival season (like Diwali).
- Eligibility: Employees earning up to ₹21,000 per month are eligible for a statutory bonus if they have worked for at least 30 days in the accounting year.
- Calculation: The bonus is calculated based on the employee's salary and the profits of the company for the financial year. The minimum statutory bonus is 8.33% of the salary earned during the year, while the maximum can go up to 20%.
### 2. Monthly Bonus
- Frequency: Paid on a monthly basis, often as part of the salary or as a separate incentive.
- Nature: This is generally not a statutory requirement but can be part of company policy or incentive schemes.
- Eligibility: It may apply to all employees or specific categories based on performance, role, or company policies.
- Calculation: Usually determined based on performance metrics, attendance, or company profitability.
### Key Differences
- Nature: The yearly bonus is often a statutory requirement, while monthly bonuses may be discretionary and linked to performance.
- Amount: Yearly bonuses are based on the annual salary and company profits, whereas monthly bonuses may vary based on individual or team performance.
### Conclusion
For statutory bonuses, you primarily follow the yearly method with a focus on Diwali as a common payment period. Monthly bonuses, while beneficial for employee morale, are typically discretionary and not mandated by law. Always ensure compliance with applicable laws and company policies regarding bonus payments.
From India, Madras
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